Tag Archives: Condos

Busted condo projects have stalled downtown revitalization efforts throughout the country. But help is on the way as these developments get restructured and are converted to rentals.

Take the case of San Jose, Calif., which has been trying to develop a vibrant downtown since the mid-1980s. Over the years, roughly 4,500 rentals and condominiums have been built downtown. The San Jose Sharks, a National Hockey League team, began playing there in 1993. Restaurants have opened, and a theater has been refurbished for opera.

But the downturn waylaid one of the critical pieces of the revitalization effort. A luxury 23-story condominium tower, which officials had hoped would help bring a critical mass of residents downtown, was originally slated to be finished by 2009, according to Harry Mavrogenes, executive director of the San Jose Redevelopment Agency.

Construction costs ran over budget, however, and developers couldn’t sell units in the $750,000 price range as hoped. Now, the curvy Three Sixty Residences is still empty after completion in early 2010, Mavrogenes says.

The gridlock is now set to ease as a Beverly Hills, Calif., real-estate company has cut a deal to buy the property’s $119 million construction loan at a discount from U.S. Bank. If the deal is successful, real-estate investment firm Kennedy Wilson plans to foreclose on the property and convert it into a rental, Mavrogenes says.

That would likely be good for San Jose. Although buyers are arguably more desirable residents than renters, getting more bodies downtown is paramount to keep the revitalization energized.

“Empty buildings stop revitalization cold,” says John McIlwain, a senior fellow for housing at the Urban Land Institute. “You want to get it occupied so you can get the people in there who can support the stores.”

Similar stories are playing out in downtowns throughout the country that are suffering from a glut of empty condos. These projects failed because developers couldn’t sell at the prices they needed to pay off their construction loans.

But opportunistic investors who buy that debt at a discount or take over the projects in another way typically can make a profit renting out units at market rates.

Victor Calanog of Reis Inc., a real-estate research firm, says busted condos have hit Phoenix, Miami and other overbuilt housing markets the hardest. He estimates that about 6,300 failed condo units were converted to apartments from 2008 to the third quarter of 2010 nationally and that an additional 10,000 former condos are expected to be added in the next two years.

The conversion strategy is working partly because the rental market is faring better than most other commercial property types. Average vacancies in the major apartment markets nationwide fell to 7.1% in the third quarter of 2010, from 7.9% in the same period in 2009, and average monthly asking rents increased 0.5% from the second quarter to $1,037, Reis says. At the same time, U.S. office, retail and warehouse vacancies and rents are still deteriorating or stabilizing.

Part of the reason for this strong performance is that new development of rental apartments has been limited in recent years.

New supply is coming on the market from busted condos and single-family homes now for rent. But in many cities, this source of supply hasn’t been enough to halt rising rents, given the size of the market. There are an estimated 10 million apartment units in major U.S. cities, Reis says.

“In many markets, the recovery is just powering through the repurposed condos,” Calanog says.

Kennedy Wilson is betting that San Jose will be one of those markets. The San Jose rental market does look particularly promising: At 3.9%, its third-quarter vacancy rate is the third-lowest of the nation’s major metro areas. It also reported the 10th-strongest asking-rent growth, rising 1.1% from the previous quarter to average $1,515.50 a month, Reis says.

By contrast, the median sale price for resold condos in San Jose’s Santa Clara County fell 4.5% to $320,000 in October from about $335,000 in October 2009, and sales volume fell about 25.9% in the same period, according to MDA Dataquick.

Three Sixty Residences was built by Mesa Development LLC of Chicago. The project is one of the most luxurious apartment buildings downtown, with a pool, kitchens featuring Italian cabinetry and views of the Santa Cruz Mountains. Analysts predict two-bedroom units could fetch between $2,600 and $3,200 a month as rentals.

It is also one of four downtown condo towers that were conceived near the peak of the housing boom and that bring more than 800 units to the market. But those projects are faring somewhat better. A spokesman for the 88, one of the other new downtown towers, says more than 55% of its units have sold.

So when residents of Zeckendorf Towers, the condominium complex at One Irving Place on the east side of Union Square in New York City, voted to replace an aging conventional roof with an environmentally friendly one, they decided that a basic installation at $10 square foot — essentially sod and unlandscaped greenery — would not do. Instead, they chose elaborate landscaping with small hills, a wide variety of vegetation, pathways with paving stones and dramatic lighting.

The result is what the condo board believes is the city’s largest green roof, at 14,000 square feet. Installation of the seventh-floor rooftop, over a branch of Beth Israel Medical Center and bookended by four 29-story condo towers, began in April and was finished in October.

Although it is in winter mode, residents are already enjoying the visual benefits of the roof, which cost $330,000, or about $23.50 a square foot (minus a $60,000 one-time tax abatement from the city). The condominium paid for it from their reserve fund, said Hazel MacMurray, a board member at Zeckendorf Towers.

Residents, other than a handful who have private terraces, don’t have access to the roof, but for the rest, “The beauty is looking at it,” Ms. MacMurray said, adding, “You can see them just looking out. They’re experiencing the garden, and it just changes their lifestyle.”

Ms. MacMurray said she also anticipated that the green roof would benefit property values at Zeckendorf Towers. Currently, studio, one- and two-bedroom condos in the 670-unit full-block development, which was built in the 1980s, are listed at a median price of $1,315 a square foot, according to Streeteasy.com.

But any increase in values will last only as long as it takes for other buildings to catch on and retrofit their own rooftops, said Darren Sukenik, a managing director at Prudential Douglas Elliman and a top agent in Zeckendorf Towers. Many new residential developments are planning green roofs, he said, and they will eventually become the standard.

Zeckendorf Towers’ roof designer, New York Green Roofs, went to great lengths to make an all-season attraction for residents, said Amy Falder, a partner in the company. Witch hazel will burst into small yellow flowers in January, and striking plants like Japanese maple will have brilliant red foliage throughout summer and fall. Dogwood will display white blooms in spring, and anemones and balloon flowers will add to the profusion of color in summer and fall. Rhododendrons and upside-down ferns remain green year round. For the holidays, lights have been strung from tree branches.

Advocates say that green roofs, which have been common in Europe for years, offer a variety of benefits. First, the vegetation protects the roof’s membrane from cycles of freezing and thawing that can tear it, as well as from ultraviolet light that can wear it out, Ms. Falder said. This doubles the life of a green roof over a conventional one.

Also, a green roof provides insulation that makes the building envelope more energy efficient. Vegetation protects the roof from the wind in winter, and when covered in snow, the rooftop can be particularly effective at retaining the building’s heat, Mr. Brunner said. The rooftop’s cooling effects are even more pronounced in summer, when the vegetation can cut rooftop temperatures in half.

An analysis of green and black roofs published this year by Columbia University found that an unshaded green roof of 1,000 square meters (about 10,750 square feet) could save $330 to $350 a year in heating costs and $225 a year in cooling costs. In the case of Zeckendorf Towers, the energy benefits of its green rooftop will go to Beth Israel Medical Center, Ms. MacMurray said. The hospital space is a commercial condo, and Beth Israel is not paying for the roof.

Almost the entire rooftop at Zeckendorf Towers, even the tops of bulkheads, is covered in soil and mats of about a dozen species of sedum, which will transform into a carpet of green this spring, said Chris Brunner, another partner in New York Green Roofs, which has installed 35 green rooftops in the Northeast in the past five years, primarily in New York. Some species will take; others might not, he said, explaining that the roof will evolve over the years.

Ms. MacMurray said the whole city benefited when a green roof was built, because of their ability to retain storm water. According to a 2007 report by the environmental group Riverkeeper, a 40-square-foot green rooftop can absorb 810 gallons annually. So each year Zeckendorf Towers’ roof could prevent about 283,500 gallons of storm water from flowing into the city’s sewers and its flood-prone subway system, which has a major station below the towers.

“This green roof was really done to try to progress this building from the 20th century into the 21st,” Ms. MacMurray said, “and there are enormous environmental benefits to doing that.”

Its no small feat that Minneapolis was able to clear itself from one of the biggest winter storms to hit the Midwest is quite some time. Below are the photos to give you an idea if you are planning to make Minneapolis your future home. It makes underground heated parking in any Minneapolis condo look really attractive right now!

The American Academy of Neurology is the world’s largest professional association of neurologists. Founded by the chair of the neurology department at the University of Minnesota in 1948, the American Academy of Neurology has more than 22,500 neurologists and neuroscience professionals dedicated to promoting the highest quality patient-centered neurologic care. Mortenson Construction, along with ESG Architects Inc. and 20 Below Studio, will break ground on the new AAN headquarters in early 2011 with the building scheduled to be ready for occupancy in spring 2012. The five-story building features a sensory garden, roof-top terrace and state of the art meeting space capabilities. The Academy will also provide electricity to vendors of the Mill City Farmers Market through outlets strategically placed along the exterior of the LEED certified building.

I have noticed more and more, when I sit down with clients to find out the reason for choosing to live in downtown Minneapolis over the burbs a big issue that comes up is: Transportation Costs. As gas prices trend upward it has struck a nerve with Buyers and the market is responding. We are seeing much more Buyer and Seller activity within the downtown core than anywhere else in the market right now and to be honest I don’t see this changing anytime soon. In the past Buyers lived the urban life for a variety of reasons. Now Buyers are being lured into city living now for some very specific economic reasons-transportation costs. It is universally accepted that low gas prices-while they move up and down a bit-are a thing of the past in our country. As this happens I see more Buyer’s taking a step back and asking a serious question: How much time and money do I want to spend commuting?

In the Minneapolis/St Paul market there are thousands of agents out there working with buyers and sellers. Many of the agents sell all sorts of Real Estate-however few focus on a particular niche of the market and stick to it.

As one of the top real estate agents in downtown Minneapolis, Ben Ganje has been involved with numerous condominium projects in the past and is currently selling Skyscape Condos and working with other buyers and sellers in the market.

Unlike a typical single family home, condominiums have a completely different set of details to understand and having an agent that can explain these and interpret them to your advantage is for a successful buying or selling experience. If you are thinking of looking to buy or sell it may be a good idea to have a conversation with Ben about your next step in the Urban Life!

Okay, so you have begun the google search for your next move when you start seeing some significant pricing differences between listings in Minneapolis and those in St Paul. Case in point: the typical 1000 square foot condo in St Paul sells on average for 180k however that same condo in Minneapolis sells for a whooping 230k! Yikes! Why such a difference in price you ask? The answer has always been the same: LOCATION, Location, location!

The next question that buyers almost always ask me is: So which city should I really be investing in? Minneapolis or St Paul? The answer is it really depends on a number of fundamental buying questions you need to be asking yourself.
The first question you need to ask yourself is: what is my true motivation for going urban? Is it merely wanting to have a shorter commute to work every day? Or is it because you want easy access to all the restaurants and cafes the city has to offer? Or are you just short for spare time and looking to avoid those maintenance related issues if you took the house option in lieu of a condo. I think these are all good and rational points to be had. However depending on how you answer this could determine which city makes the most sense. If you happen to work for a company such as Lawson Software its logical to think St Paul. However its Minneapolis that has plenty of restaurants and cafes to keep anyone busy trying new eats all the time.

The root of this discussion comes down to two different paradigms buyers fall into one way or another. One rational is that because pricing in St Paul runs a bit lower I can get more condo for my money. The other rational is to buy in Minneapolis with the understanding that you are paying a premium for the area and more importantly the lifestyle that goes along with it. Minneapolis has a fair amount of condos relative to St Paul. Minneapolis has plenty of infrastructure for many residents to work and live downtown without running out the to burbs for much. On the price spectrum Minneapolis does have many more higher-bracket condos which influence median prices as well. Looking at past data as well Minneapolis has done better for appreciation than St Paul on any price point. So ultimately if you do buy in Minneapolis there is a premium paid however you are buying in a more desirable area the long term appreciation should offset the premium.

It seems like only a few months ago we finally had our first urban grocery just across the River from downtown in Northeast Minneapolis. Since then the area has seen quite a uptick in traffic both in cars and pedestrians but it’s been a long time coming.

Once known as a heavy industrial working-class area from the early 1900s till only recently in the 80s when developers started seeing the potential that laid ahead as the exodus of the milling era was abandoning the riverfront. Since then the area has slowly developed all types of residential and commercial projects, most notably of recent addition would be the Lund’s Grocer that opened in the Cobalt Condominiums building off University and Central Ave.

In recent years attention has focused in terms of development on the strip of Riverfront nestled between Northeast and the University of Minnesota East Bank campus called “Saint Anthony Main”. This is the last frontier of area along the riverfront in Minneapolis to develop and already plans have started to clearly take shape. In the 80s this area was the place to be as recent apartments such as the Falls/Pinnacle and condominium projects LaRive and Winslow House had lured tenents and owners alike out of the burbs and into downtown Minneapolis. Riverplace was built along Main Street that housed numerous cafes and restaurants that are still in existence today. There are a cluster of condominium projects now on the market in the area: Phoenix on the River, The Flour Sack Flats and Cobalt Condominiums. Despite the apparent housing glut on the metrowide level this micro market has seen fantastic sales results of pre-construction sales as well as resales in the area and the momentum doesnt look to be slowing anytime soon.

What are the significant drivers of buyers coming to this area of Minneapolis?

There are a number of reasons why this area has been well-received by the real estate market. First and foremost the location is ideal as St Anthoy Main is set directly across the Mississippi River from downtown giving anyone proximity and amazing views of the city. Being along the Riverfront also gives access to some of the main trails running through the city as well as parks complete with the Stone Arch Bridge connecting the area to Downtown Minneapolis. Having the river separating the area from downtown also gives St Anthony Main a more tight-knit, neighborhood feel. During the summer the area plays host to a number of Riverfront events ranging from fireworks displays to weekend art fairs in the parks. The spectrum of residents living in the area varies from large collection of empty nesters that take advantage of the local ammenities to young urban professionals that see the excitement of living downtown but want more of a low-profile neighborhood feel. A fair amount of residents are students and teachers of the University of Minnesota as well given the fact that the college is blocks away.

Quick Background

Ben Ganje is a consistent sales leader in the downtown Minneapolis condo market. For the past 7 years Ben has worked with multiple developers selling a number of condo & loft projects in both cities as well as working with buyers find the best deals. He is married to his beautiful wife Carrie, and the happy father of 2 boys, Finnegan and Miles!

With all the condo options buyers have to consider these days it is critical to be working with an experienced Real Estate agent as a resource for the buying process. The best part is it doesn't cost you anything! Sellers in the market compensate a Buyer's agent so there are seldom any fees involved! If you are looking to buy a Condo/Loft and want to work with an agent that deals exclusively with the urban market, contact Ben to discuss your needs and schedule a condo tour today!